Issue link: https://maltatoday.uberflip.com/i/1416377
6 maltatoday | SUNDAY • 3 OCTOBER 2021 NEWS A Christmas troubled by congested ports and lack of containers KURT SANSONE GETTING presents underneath the Christmas tree this year may be problematic with global trade routes in disarray because of few- er empty containers and high freight rates. Congested ports around the world have created bottlenecks that are hitting Maltese import- ers and exporters hard. And the blame lies squarely on the disrup- tions caused by the COVID-19 pandemic. Port and factory closures dur- ing the pandemic, coupled with an increase in global order books have squeezed supply and forced prices up. The situation means that people like Chris Vassallo Cesareo, CEO at Domestica Ltd, a furniture im- porter and manufacturer, cannot give clients quotations that are valid for long on some products. "When we quote for certain products we tell customers the prices are valid for two weeks not for two months because of the disruptions in the supply chain that have led to exorbitant in- creases in freight rates and raw materials," Vassallo Cesareo tells MaltaToday. And the cost increases he men- tions are frightening. "Freight costs from the far east over the past year have increased by around 300%," he says. Frederick Schembri is the man- aging director at Aurobindo, a pharmaceutical firm that imports 15 containers per week from In- dia where its parent company is. "The cost of shipping a contain- er from Asia to Europe was in the region of around €4,000 and this has now doubled or even tripled as a result of COVID. Costs have climbed and this has impacted local businesses," Schembri says. Stranded containers and Freeport costs He notes that air freight is no- where near experiencing a return to normality after the aviation sector was grounded and sea freight is hampered by disrup- tion. "Containers are stranded in and just outside different ports around the world and to se- cure space we now pay for the roundtrip, to get the container from -Asia to Europe and send it back," he explains. Consumers will eventually feel the burden of higher costs al- though manufacturing compa- nies like Schembri's are doing all they can to improve their pro- cesses to remain competitive. He also laments the higher tar- iffs at Malta Freeport and calls for some form of government inter- vention to minimise the domestic costs. Freight costs have increased across the board but the magni- tude varies from region to region, according to Norman Aquilina, Group CEO at Farsons, a brewer and food and beverage company. "The cost increases connected to logistics are a mix of domes- tic port charges (Freeport and Valletta Gateway) of around 5% and freight costs to and from various European ports and be- yond, starting from 10% surges from within Europe to as much as five to seven-fold increases for shipments from outside the EU," Aquilina says. Farsons is big on importation but it also has an export business for its own beer products, which has also been hit hard by global disruption. Aquilina says that higher freight costs and the difficulty to source containers has had a direct im- pact on the company's export operations. "This has somewhat undermined our export compet- itiveness and the extent of these increases makes it impossible for our customers to absorb these freight cost increases resulting in some lost opportunities, even if these increases are not unique to Malta," Aquilina says. He notes that freight costs had been increasing regularly since 2019 but COVID-19 simply made things worse. "The fre- quency and magnitude of freight rate increases were dramatic as a result of the pandemic and we experienced several instances in which shipments were delayed due to unavailability of space on container ships," Aquilina says. He explains that the exponen- tial rise in international orders as a result of markets re-opening and economic activity picking up has led to the supply chain bottle- necks. 'A backlog like never experienced before' Alex Montebello, CEO at Malta Freeport says the pandemic has had a knock-on effect that started with port closures in Asia, most especially in China. "Industrial production in China dropped, partly fuelled by facto- ry closures because of COVID, while consumption grew. Or- ders have been increasing but the whole industry is seeing a backlog like never experienced before in the world," Montebello says. On the West coast of the US there are around 77 large con- tainer ships waiting to be serviced in ports and similar situations are found in northern European ports like Hamburg, Felixstowe and Antwerp. "A four to five-day wait outside a port inevitably has a knock-on effect and this is leading to a lack of availability of ships and conse- quently containers. The econom- ics of supply and demand mean that freight rates have increased at unprecedented levels," Monte- bello says. Malta Freeport is not immune to this situation although Mon- tebello says the company is man- Domestica Ltd CEO Chris Vassallo Cesareo Aurobindo managing director Frederick Schembri If the Christmas gift does arrive on time, it could pretty much be more expensive as well